Bill That Would Put People Into Foreclosed Homes Draws Heavy Flak

Although it still enjoys support from a broad coalition, legislation to turn some foreclosed homes into affordable housing now also faces deep-pockets opposition.

Americans for Prosperity, an economic policy group launched by coal billionaire David Koch, is mounting an advertising campaign on radio and television trying to rally public opinion against the proposal -- Senate Bill S-1022.

"A lot of people don't even know this is happening, or the significant negative impacts this bill will have on our neighborhoods," said Steve Lonegan, the former Bogota mayor and gubernatorial candidate who is the state director of Americans For Prosperity.

He echoed the TV spot, which suggests the effect would be to "move in drug addicts, ex-cons, sex offenders, and homeless people."

"Any local official would have to be crazy to support this," Lonegan said of the legislation, whose primary sponsors are state Sens. Raymond Lesniak (D-Union) and Barbara Buono (D-Middlesex) and Assemblyman Jerry Green (D-Union).

The proposals' backers include the state League of Municipalities, the New Jersey Builders Association, the Housing and Community Development Network of New Jersey, the New Jersey Bankers Association, and other groups not often found lined up together.

Supporters said the criticisms reflect a misreading or misunderstanding of key provisions of the bill. At least, those who responded politely said that.

"There's a special place in hell reserved for Steve Lonegan," Lesniak said, repeating it with the admonition, "that's on the record."

The bills would establish a temporary agency, the New Jersey Foreclosure Relief Corp. Working through the state Housing and Mortgage Finance Authority for five years, the corporation would acquire houses in foreclosure and make them available to towns, non-profit groups, or private investors as low- and moderate-income housing.

In a time when New Jersey faces an estimated backlog of 50,000 to 100,000 foreclosure cases, as well as new ones, Lesniak portrayed the initiative as "a way to support property values and reduce crime by getting people into vacant homes, provide municipal tax revenues while stabilizing the housing market."

"It's based on the very successful model of the Resolution Trust Corp., which cleaned up the housing mess left by failed Savings and Loans during the 1980s by taking over and selling off their portfolios," he said.

The RTC, which was in operation from 1989-95, closed or otherwise resolved almost 750 troubled financial institutions in the wake of a previous housing bubble. This time, the economic problems have been compounded by related securities frauds, spreading the current downturn beyond the borrowers and lenders whose transactions were not adequately secured.

Lonegan said attempts to deal with the fallout from the most recent crisis have amounted to an expansion of government while putting taxpayers on the hook for private interests. The new legislation is "another bailout for the banks," he said.

"Every special interest in the state with something to gain is lined up behind this," he said. "But thank God the bankers association, the builders association, the realtors association don't run the State of New Jersey."

If philosophy is at the heart of the debate, the advertising thrust aims elsewhere. The TV spot zeroes in on an amendment to allow state agencies to acquire foreclosed properties for use as halfway houses, assisted living centers and other facilities for "special needs" populations.

In the language of the bills, that "means individuals with mental illness, physical or developmental disabilities, victims of domestic violence, ex-offenders, youth aging out of foster care, disabled and homeless veterans, individuals and households who are homeless, individuals with AIDS/HIV, and individuals in other emerging special-needs groups identified by state agencies. Individuals shall be at least 18 years of age if not part of a household."

That confers power to "take these problems to places across the state, to suburbs across the state," Lonegan said. "This is COAH on steroids."

The status of the state Council on Affordable Housing has been up in the air since Gov. Chris Christie tried unsuccessfully to abolish the agency, which the legislature created to remove some affordable housing issues from the courts. The situation has grown ever more complicated for towns, who now face a July deadline to spend housing funds, but no COAH regulations authorizing their outlays.

The foreclosure housing bill represents one step toward solving that problem, according to William Dressel, executive director of the New Jersey League of Municipalities. Local officials have not seconded Lonegan's concerns, he said. The ad campaign seems to be based on "a misreading of the bill," he said.

As for state agencies siting facilities around the state, "they can do that now," Dressel said. "Under this legislation, a town must agree to participate, to allow the use of its housing trust funds. So it's voluntary for them to be in it at all."

As for type of facility and location, state agencies "still would have to follow the local planning and zoning requirements," he said, adding the legislation changes nothing in that process.

The league is more concerned about the potential loss of affordable housing funds, and many local officials like provisions in the legislation, Dressel said. By designating trust money to acquire foreclosed properties, they could get a 2-1 credit toward their legal obligation to low- and moderate-income people.

Otherwise, when the deadline arrives, Richard Constable 3d, the acting commissioner of the Department of Community Affairs, "has already told us that he's going to take the municipal trust funds" for state use, Dressel said.

"This is money they set aside for affordable housing," Dressel said. "There's very little other money available. There's no help from the state. There's not even much help from the federal government."

"I'm never accepting the fact they force low-income housing on our communities," Lonegan said, faulting Christie for failing to deliver on his promise to abolish COAH.

"We can wish it away, but municipal officials still have an obligation to follow the law," Dressel said.

Lesniak said his approach would help municipalities not only by meeting affordable housing requirements, but by ensuring a steady stream of tax revenues. Towns could choose to administer rental units directly through their own housing agencies, or allow nonprofits or private investors to carry the ball, he said.

Those foreclosed homes that were resold would be deed-restricted for 30 years, which would effectively regulate future changes of ownership or tenancy, Lesniak said. Aside from having the corporation sunset after it shepherds the acquisitions, "this is just like any other affordable housing program," he said.

He suggested the "special needs" provision potentially allows the state to save money by enabling agencies to "take advantage of the opportunity" to acquire vacant properties at a low in the market. But the main provisions are aimed at keeping or putting people in houses that might otherwise sit empty.

That is a selling point for the New Jersey Association of Realtors, whose chief executive officer, Jarrod Grasso, released a statement calling the legislation "an excellent way to provide low-cost housing for working families without placing the burden on New Jersey's property owners." In some communities, it makes more sense to deed-restrict existing homes than to build new "affordable" units, he said.

Danielle Alpert, the association's communications director, said the group does not wish to respond to the ad campaign directly, but "we're still supporting the legislation."

The bill offers a 2-1 credit to towns, with each foreclosed house designated as "affordable" counting double toward its requirement under COAH. Although this could mean less new affordable construction, the New Jersey Builders Association endorsed the legislation, saying it would "stabilize housing prices" by reducing the potential wave of new foreclosures.

During three decades reporting in New Jersey, Joe Tyrrell has covered everything from Avon to Zarephath, with a particular emphasis on politics and government, the environment and agriculture. He founded the New Jersey Foundation for Open Government, which unites civic groups, citizens and journalists to promote transparency and ethics.